After weeks of rumors, Dell today confirmed that it has a definitive agreement to acquire Quest Software for $2.4 billion in a deal which will strengthen Dell's offerings for data center management software. The acquisition is part of Dell's broader strategy to increase its enterprise IT business, which offers better growth and profit margins than the consumer PC business. Software is a key part of that effort, as data center managers seek improved tools to manage their increasingly complex infrastructure.
Quest (QSFT) has a diversified software portfolio that generated $857 million in revenue in fiscal year 2011, with gross margins of 86 percent and operating margins of 11 percent. The company's offerings include software for performance monitoring, server management, database tools, and security and access management.
"The addition of Quest will enable Dell to deliver more competitive server, storage, networking and end user computing solutions and services to customers," said John Swainson, president, Dell Software Group. "Quest’s suite of industry-leading software products, highly-talented team members and unique intellectual property will position us well in the largest and fastest growing areas of the software industry. We intend to build upon the strong momentum Quest brings to Dell."
Dell has been on an acquisition spree, acquiring six companies thus far in 2012, including three deals in three days in April. The company has been sharpening its focus on software for enterprise data centers, seeking to extend the success it has seen with its Data Center Solutions (DCS) unit, which customizes hardware for the company's largest data center customers.
Dell's offer topped a previous bid of $2.17 billion from Insight Venture Partners. Under terms of the agreement, Dell will pay $28 in cash for each share of Quest. That was only a slight premium to Friday's closing price of $27.81, which had risen following the company's June 25 announcement of a $27.50 offer from a "strategic bidder," widely rumored to be Dell (DELL). The deal has been approved by the boards of directors of both companies, and is expected to close before Sept. 30, subject to approval by Quest's shareholders.
“Clearly, Dell’s distribution, reach and brand are well recognized in the industry," said Vinny Smith, chairman and chief executive officer of Quest Software. “Combine that with Quest’s software expertise and award-winning systems management products and you have a very powerful combination for our customers and partners. With this transaction, Quest’s products and employees become the foundation for Dell’s critical software business.”
Quest is based in Aliso Viejo, Calif. and has more than 100,000 global customers, including 87 percent of the Fortune 500. The company has approximately 3,850 employees and operates 60 offices in 23 countries.